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New Zealand makes first arrest over student loan debt

By Amy R. Connolly   |   Jan. 22, 2016 at 2:54 PM

WASHINGTON, Jan. 22 (UPI) -- Think the laws are tough on student loan borrowers in the United States? There's one New Zealand borrower who will beg to differ.

Ngatokotoru Puna, 40, was arrested at Auckland Airport earlier this week for defaulting on his 20-year-old student loans totalling $130,000. Puna earned the distinction of being the first person arrested under the country's new law, which targets people living outside the country who have defaulted on their student loans.

Puna wasn't allowed to return to his home in the South Pacific's Cook Islands until he handed over $5,000 and a promise to repay the rest.

"That's my first time in a police cell. It was unbelievable," he said. "I don't think I'm a criminal."

New Zealand has been struggling for years to get overseas-based borrowers to repay some $840 million in defaulted student loan debt. In making its new law, the country determined it "will send a clear message to all borrowers that non-compliance is unacceptable, and there are consequences for ignoring repayment responsibilities."

A conviction can mean a $2,000 fine and three months in jail.

The New Zealand Union of Students' Associations said about 70 percent of the estimated 130,000 borrowers living overseas are behind on their payments. The "draconian measure" restricts human rights, said union acting spokeswoman Laura Harris.

"We are concerned that this will turn those who are overseas with student loans into permanent refugees, and do little to encourage further compliance with the student loan scheme," she said. "There are clearly issues with the scheme if an overwhelming majority of the participants are non-compliant and then government needs to look at this before enforcing this draconian measure."

Unpaid student loans are not just a problem in New Zealand. Outstanding student loan debt in the United States has hit $1.3 trillion, with some $103 billion in default. The average individual student loan debt is about $30,000.

Missing repeated student loan payments in the United States means the government can garnish wages without a court order and, in some states, take away driver's licenses and repeal professional licenses.

Puna said he took out $40,000 some 20 years ago while pursuing a bachelor of arts degree at Auckland University. With interest, it's ballooned to about $130,000. He has since returned to his home, where he lives with his wife and five daughters. He said he never received notices or phone calls from the country's revenue department because the department had the wrong address, which he has since rectified.

"I feared for my life. I was so scared," Puna said of the seven hours he spent in a jail cell. "I couldn't believe I was arrested for my student loans."

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